Randy Shaw's Power Plays

Sixteen years ago, Randy Shaw started a housing clinic with $50 and a good idea: educating tenants. Now he's got more than $900,000 a year to spend -- and clout to match.

After 10 years of fighting for tenants in court, the THC branched out. In 1989, Shaw proposed a program -- paid for by the city but run through the THC -- that would serve as a go-between for welfare recipients and hotel owners. Called the Modified Payments Program (MPP), it authorizes the THC to act as a tenant broker for residential hotel owners. "The landlord is guaranteed their rent payment, and folks who are very, very low-income are guaranteed housing," explains Maggie Donohue, program administrator for the Department of Social Services.

The MPP has become the Tenderloin Housing Clinic's biggest project. In six years, it has grown from $102,000 to $458,000, and now constitutes about half of the THC's annual expenditures. Shaw himself receives 43.5 percent of his annual $65,000 salary from the hotel program, and the clinic's legal staff is partially funded by a federal Community Development Block Grant, which pays $87,450 a year to the Tenderloin Housing Clinic.

In fact, Shaw says, "all the employees of the Tenderloin Housing Clinic, every employee, gets some kind of city money. They're all listed."

But while public funds make up a large portion of the THC's monies, the Tenderloin Housing Clinic has found another way to earn revenue: lawsuits.

Antoinetta Stadlman has lived in the Baldwin House hotel since 1991. By 1995, she was fed up with its condition. Clued in by a newspaper article to a law that allows neighbors to lodge nuisance claims against property owners who allow illegal or disturbing activities to continue unabated, Stadlman and 14 other tenants took Baldwin House owner Nick Patel to small-claims court and won $5,000 each, the maximum allowable under the law.

Patel appealed the decision to Superior Court. In Superior Court, unlike small-claims court, lawyers are more or less required. Stadlman called around. A private lawyer said he'd take the case -- for $25,000, or 30 percent of the overall settlement. Stadlman thought that was too expensive, so she asked the Tenderloin Housing Clinic for help.

"Randy said he'd do it," Stadlman says. But not for free.
Specifically, Stadlman says, Shaw offered her a contingency-fee arrangement: We handle the suit for you, and we get 25 percent of the settlement, up to $20,000. And Stadlman is grateful for that -- "They gave me a $5,000 break," she says, comparing the THC's contingency rate to the private lawyer's. But still, she decided to continue looking for a lawyer who would take the case for free.

Shaw says the fees were necessary because of the amount of work the case demanded. Generally, when a lawyer takes a case on a contingency basis, he must win the case (or win a settlement) in order to be paid. If the lawyer loses, then neither the lawyer nor the law firm gets any money.

It might come as a surprise that a nonprofit legal organization, with lawyers paid for partly with public funds, can earn money for its work. But under federal tax laws and the rules regulating charitable trusts in the state of California, there are no prohibitions on the amounts or kinds of fees that nonprofit organizations, including law firms, can charge to their clients, as long as the organization is doing the charitable work it was incorporated to do. In fact, there's no law that says a nonprofit can't make money.

And going to court on behalf of low-income people has been lucrative indeed for the Tenderloin Housing Clinic.

A window on the financial workings of the Tenderloin Housing Clinic is provided by the annual documents that the clinic and every other tax-exempt nonprofit charity or educational foundation must file with the Internal Revenue Service. The document is called a Form 990. It is a public record, and must be made available for inspection to any member of the public who asks to see it. Shaw, when first asked for the documents, is reluctant to provide them, snapping, "Go get everything from the city," into the telephone. "I'm not going to do your work for you," he says, but relents when it is pointed out to him that federal law requires that the 990s be made available on request. The THC's 990s are also, however, on file at the California Department of Justice, which is where the SF Weekly obtained them.

The 990s show that from 1985 to 1990, the Tenderloin Housing Clinic revenues grew exponentially -- almost all through lawsuit money. In 1985, which is the first year for which the THC's 990s are available at the Department of Justice in Sacramento, the organization received $66,000 in government grants and $18,000 in "program service revenue," which included "court awards, statutory fees, etc." according the 1985 filing. By 1989, business at the Tenderloin Housing Clinic had boomed -- 990 forms for that year show $126,179 in government grants and $495,678 in "Program service revenue -- proceeds form [sic] litigation; Attorney Fees."

Fueled with this explosion of lawsuit revenue, the Tenderloin Housing Clinic was sufficiently flush in 1990 to invest in a $163,500 option to purchase 126 Hyde St., where its offices are now located. In recent years, attorney's fees and court settlements have accounted for one-third of the THC's revenues, according to disclosures the THC makes to the IRS, to the San Francisco Department of Social Services, and to the Mayor's Office of Community Development.

« Previous Page
Next Page »
My Voice Nation Help

@SFCitizen Three stories in five months, one of which was a double quote. Plus one linkbait. Not seeing why you needed to pull us in.


@ScottLucas86 He runs the largest corrupt non-profit in the 415- that's not a story in itself? Your quote factory functions as part of SFGov


@SFCitizen I like your work. I'd tell if I thought you were right. But I think you and I disagree on whether quoting = supporting.

©2014 SF Weekly, LP, All rights reserved.